House prices rose by 0.88% y-o-y in Q3 2019
After several years of lacklustre performance, South Korea’s housing market growth remains sluggish. House prices rose by a miniscule 0.88% during the year to Q3 2019, from y-o-y rises of 0.94% in Q2 2019, 1.96% in Q1 2019, 1.82% in Q4 2018, and 0.71% in Q3 2018. During the latest quarter, house prices fell slightly by 0.2% from the previous quarter.
Housing restraint, economic stimulus ahead.
Elected on the promise of ending cosy ties between business and government, South Korea's new government has launched a fiscal plan that President Moon Jae-in has called 'a complete paradigm shift' based on US$9.85 billion extra spending, especially on social security, health, and small businesses, which will raise growth to 3%.
High housing costs are a political issue, so the government is targeting the "overheated speculative zone", comprised of the capital Seoul (all 25 districts) and two other areas -- Gwacheon and Sejong City. For those areas they've re-introduced increased capital gains tax (CGT) on property investors, originally introduced 2005-2014. Investors who own two houses pays an extra 10% in capital gains tax upon the sale of a property. Three-house owners can expect an extra 20% tax, in addition to baseline CGT of between 6-40%, depending on the size of the gain and the holding period.
Rents, rental yields: data unavailable in S. Korea
Recent news. South Korea’s economic growth was 2% in Q3 2019 from a year earlier, following y-o-y expansions of 2% in Q2 2019, 1.7% in Q1 2019, 2.9% in Q4 2018, and 2.1% in Q3 2018, buoyed primarily by increased government spending, and a pick up in exports and manufacturing. GDP grew by 0.4% quarter-on-quarter in Q3 2019, a slowdown from the previous quarter’s 1% growth, according to the Bank of Korea (BOK). Recently, the BOK lowered its growth outlook for 2019 to 2.2%, down from the initial forecast of 2.5%, citing economic uncertainties and weak exports.
In October 2019, the BOK slashed its benchmark interest rate by another 25 basis points to 1.25%, following a 25 basis points rate cut in July 2019, amidst mounting deflationary pressures and slowing economy.